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Johnson's Russia List


June 9, 1999    
This Date's Issues: 3333 • •

Johnson's Russia List
9 June 1999

[Note from David Johnson:

2. Washington Times: Paul Saunders, Life With Boris.
3. Tate Ulsaker: Moscow employment conditions.
4. Jamestown Foundation Monitor: MEDIA CONTINUES TO BUZZ ABOUT ROLE OF 

5. John Helmer: Financial Times/3330.
6. Russian Life: Mikhail Ivanov, Just One Year Left in Yeltsin's Term ... 
We Think.

7. RFE/RL: Floriana Fossato, Kremlin Players Vie For Political Power.

10. Moscow Times EDITORIAL: Is Kiriyenko For Real, Or Just a Tool? 
11. Financial Times: John Thornhill, RUSSIA: Regions show first signs 
of revival.

12. Moskovskiy Komsomolets: Leonid Krutakov, Smell of Oil Invigorates 
Abramovich; Berezovskiy Could Interfere in Plans for New Partition of 
State Property.

13. Moskovskiy Komsomolets: Natalya Shipitsyna, Russian Budget Will 
Become Family Budget; President's Entourage Wants To Grab Central Bank.

14. AP: Mitchell Landsberg, Russia's Young Grapple With Heroin.]



MOSCOW, June 8 (Itar-Tass) - The Kremlin does not link the 
presidential elections of 2000 to the unification of Russia and 
"Boris Yeltsin shall go into history as the president to ensure the 
first legitimate changing of power," a Kremlin representative told 
Itar-Tass on Tuesday. He reminded Itar-Tass that the president "stands 
for the invariability of the constitution and that means he will not 
allow a postponement of the elections." 
The Kremlin, however, admits that the future elections will not be 
easy. "We will have an extremely difficult period in summer 2000," the 
source said. 
As for the unification of Russia and Byelorussia, the process is 
underway but it will hardly be finalized by 2000 due to its "slow 
progress". It is also that the process "is being done within the 
framework of union institutions and no creation of the confederation is 
being discussed," Kremlin sources said. 


Date: Tue, 8 Jun 1999 
From: Paul Saunders <> 
Subject: Washington Times article

Washington Times
June 8, 1999
Life With Boris
By Paul Saunders
Paul J. Saunders is Director of The Nixon Center.

As Sergei Stepashin, Boris Yeltsin's latest nominee to serve as Russia's 
Prime Minister, struggles to form a government, officials, analysts, and 
businesspeople around the world are eyeing Russia for hints of the new 
government's policies, especially on economic matters.

If Mr. Yeltsin's firing of Mr. Stepashin's predecessor Yevgeny Primakov 
teaches us anything, however, the lesson should be that such speculation 
about the possible direction of the new Russian government - and especially 
hopes for real economic accomplishments - is a waste of time.

In fact, as long as Boris Yeltsin is in the Kremlin, the composition and 
preferences of the government have limited significance.

In his six and a half years as Russian President, Boris Yeltsin has had 
five prime ministers and, arguably, seven different governments (three of 
which were under Viktor Chernomyrdin, whose top deputies Mr. Yeltsin 
regularly replaced). Because each new government has brought about changes 
in policy, the country has rarely been moving in the same direction for 
much more than a year at a time.

Worse, the half-life of Russia's governments has decreased as Mr. Yeltsin's 
health has deteriorated during his second term in office. What government 
could demonstrate progress on such fundamental problems in just a few 
months? Even the celebrated team of Alan Greenspan and Robert Rubin could 
not have saved the Russian economy with Mr. Yeltsin pulling their strings.

The chaos surrounding the appointment of a deputy prime minister for 
economic affairs illustrates Mr. Yeltsin's increasingly erratic behavior. 
Initially it appeared that Aleksandr Zhukov, chairman of the budget 
committee in the State Duma, the lower house of the Russian parliament, 
would be offered the job. The appointment fell apart, however, apparently 
because Mr. Yeltsin would not permit Mr. Stepashin to give Mr. Zhukov the 
rank of first deputy prime minister and give him substantial control over 
economic policy.

With the recently concluded three-day career of First Deputy Prime Minister 
Mikhail Zadornov - promoted from Finance Minister early last week only to 
be sacked on May 28 - the government suffered another false start in 
filling the economic post. Mr. Zadornov sought to retain his position as 
Finance Minister in addition to his new responsibilities; Mr. Stepashin 
supported the idea but Mr. Yeltsin was firmly opposed. Mr. Zadornov was 
then given responsibility for negotiations with the IMF and other 
creditors; former Deputy Finance Minister Viktor Khristenko has been 
selected to fill the first deputy prime minister post.

Because of Mr. Yeltsin's public intervention in the formation of the 
cabinet, Mr. Stepashin's authority over his government has been called into 
question within just two weeks of his confirmation by the Duma. The 
problem is compounded by the behavior of First Deputy Prime Minister 
Nikolai Aksenenko, a former Railways Minister that Mr. Yeltsin plucked from 
obscurity to play a prominent role in the Stepashin government. Only last 
week, Mr. Aksenenko publicly insisted that it was he (not Mr. Zadornov) 
whom Mr. Yeltsin (not Mr. Stepashin) intended to run the economy.

Mr. Yeltsin has clearly selected Mr. Aksenenko - who reportedly has strong 
ties to the notorious tycoon Boris Berezovsky and, through him, with Mr. 
Yeltsin's daughter - to play the role of spoiler in the current government. 
As Anatoly Chubais and Boris Nemtsov, who were made first deputy prime 
ministers to undermine Mr. Chernomyrdin in 1997, Mr. Aksenenko will ensure 
that Mr. Stepashin is unable to have full control over the government and 
develop a base of power independent of the president's favor.

The move betrays Mr. Yeltsin's almost pathological obsession with political 
maneuvering to preserve his own power. The fact that his country faces the 
danger of another default - and that the previous government was ostensibly 
removed to get the economy moving - seem almost forgotten by the Russian 

As a result, if the Russian president remains in good health, we can expect 
that whatever its intentions, the Stepashin government, just as previous 
governments, will be largely stymied by Mr. Yeltsin's erratic intrigues. 
If Mr. Yeltsin's health deteriorates, Mr. Stepashin may have somewhat more 
latitude; however, the combination of uncertainty about the president's 
recovery and his propensity for firing prime ministers when his health 
improves would probably limit Mr. Stepashin's ambitions. Either way, the 
new government is unlikely to accomplish much. Its ministers - and Russia 
- will merely be marking time until Mr. Yeltsin leaves the Kremlin.

Under the circumstances, the Clinton Administration, foreign investors, and 
others dealing with Russia should avoid high expectations of the country's 
latest government. In assessing the appointments of Mr. Khristenko and 
Mr. Zadornov, both considered reform-oriented, it is important to remember 
that Mr. Yeltsin's goal is likely to balance the influence of Mr. Aksenenko 
(who also must not be allowed to become to powerful) and to impress Western 
governments, international financial institutions, and other creditors - 
not to make any significant policy changes.

The Clinton Administration and the International Monetary Fund have already 
fallen for the ruse of new governments and new personalities in Moscow more 
than once. While they were right to believe that there is still hope for 
Russia, they were wrong to trust Mr. Yeltsin to realize that hope. 
Russia's hopes - and America's - must wait for the post-Yeltsin era.


Date: Tue, 8 Jun 1999 
From: directinfo/Tate Ulsaker <>
Subject: Moscow employment conditions


I never expected to be in the market to hire chief programmers away from a
nuclear facilities but that is exactly where I am. I never expected to see
former big 5 analysts come in for my most menial position available, but I
saw two of them in the past 3 days. Current Moscow pay for an MBA degree,
English fluency, 2 years professional experience, people skills and
technical ability: $200 if they even find work. Employers setting this
standard: The Central Bank of Russia for example.

Friendly advice to those who can expand: 
It is an employer's market now. A great chance to grab the best for a
bargain and still pay better than average wages. A longer term strategy
would have them also take a piece of the marginal growth that they
contribute towards your company. Their resulting dedication to your vision
of mutual growth will pay off when turbulence hits again.

Does anyone have any experiences to share about the current employment
situation outside of Moscow? If I understand the more serious writings of
Matt Tiabbi (of The eXile), it seem that money is hardly even being used in
the regions these days.

Tate Ulsaker
Director of Operations
Direct Info, Inc.
+7 (095) 433-6366


Jamestown Foundation Monitor
8 June 1999

continued to speculate--wildly, some would argue--about the influence of The
Family--the Kremlin inner circle--over the cabinet and the country in
general. One report this week, citing "information from reliable sources,"
maintains that Stepashin was very close to being fired at the behest of
Tatyana Dyachenko last month, and was saved only by the intercession of
Naina Yeltsin, the president's wife. The account concludes that, given that
even members of Yeltsin's biological family are split, whether presidential
elections will be held next year is up in the air (Expert, June 7).

Another account, meanwhile, reports that members of The Family (the
political one) have decided that Dyachenko will succeed her father as head
of state--and not through democratic elections. This version has Boris
Berezovsky "insisting on a force variant for resolving the problem" of
succession, which will include dissolving the State Duma and banning the
Communist Party. The pretext for these actions would be created by moving
Lenin's body from the mausoleum on Red Square, as a way of provoking
communist followers into illegal actions (Novaya Gazeta, June 7).

Meanwhile, Kremlin administration chief Aleksandr Voloshin said in an
interview that the theme of the influence of the presidential "family" over
Kremlin decisions has been "artificially created" by the media (Izvestia,
June 7).


Date: Tue, 8 Jun 1999 
From: (John Helmer) 
Subject: Financial Times/3330

I hope the expert readership of the List will be able to help
the Financial Times of London, which reported Monday -- through
its Moscow correspondent -- that Sergei Kirienko "remains
popular in Russia in spite of being prime minister at the time of
last August's devastating financial crash." 

Popular with whom? that's the question, and how popular -- if it's possible
to estimate when a positive rating is smaller than the margin of
sampling error?

Ever since John Lloyd, the FT correspondent who loved Yegor Gaidar so
much, he reported him the next prime minister of Russia (when the
Duma voted Victor Chernomyrdin instead), the FT has been unable to let the
facts get in the way of wishful thinking in Russian politics. If John 
Thornhill, the author of Kirienko's popularity, or his editors had simply 
crossed the river (the Thames, that is), and asked the business denizens of 
the City of London, what they thought of Kirienko, the resulting report 
might have been a little closer to the Russian reality.

And that's the most interesting thing: when the international finance
markets are as dubious of Russia's politicians as Russians are, why is
the FT so rudderless in a sea of obvious facts?


Date: Tue, 8 Jun 1999 
From: Paul Richardson <>
Subject: RusLife Online: Yeltsin's Last Year

Just One Year Left in Yeltsin's Term ... We Think
Mikhail Ivanov is Executive Editor of Russian Life magazine, the bimonthly 
magazine of Russian culture, history, travel and life. Visit us online at:

The expiration date President Boris Yeltsin's tenure approaches. And, as it 
does, the number of plausible "scenarios" by which the president would stay
power beyond the year 2000 is growing like mushrooms after a spring rain. The 
following three scenarios have reportedly been concocted by Yeltsin's inner 
circle (which political observers call "the family," or, "camarilla"):

Version #1
Boris Yeltsin expedites a political union with Belarus, giving him a 
face-saving legal pretext to keep his presidential seat. "It's a whole new 

Version #2
Yeltsin's decrees a state of emergency citing, say, an aggravation of the 
situation in Chechnya. Needless to say, this most dangerous scenario
entails a 
cancellation of elections and would allow Yeltsin to rule as long as he is
to sign decrees. Nota bene: the very first word President Yeltsin uttered
regaining consciousness following his heart bypass operation was "ukaz" --
he wanted to sign the decree providing for the return of power to him.

Version #3
Yeltsin actually leaves in 2000, but manufactures a "smooth passage of power" 
to an appointed heir-apparent, someone who would provide unquestioned
security to Yeltsin and his entourage.

Of course, each of these options has a multitude of deviations which, in
depend on the multitude of unknowns in the Kremlin maze. The "family"
Tatyana Dyachenko, financier Boris Berezovsky, journalist-administrator 
Valentin Yumashev and the fresh "relative" oil baron Roman Abramovich) is 
carefully weighing all options. The final version will depend on many factors 
-- namely, the specific correlation of forces in Russia's internal political 
arena, and, last but not least, Yeltsins' physical and moral health (as 
Yeltsin's recent victory over the leftist Duma showed, he still has the final 
say in Russian politics).

For now, indications are that Version #3 is most likely. Indeed, the Kremlin 
seems to be trying to clear the way for Yeltsin's eventual heir, whoever that 
might be. The Hobson's choice of the moment seems to be between ex-railway
Nikolay Aksyonenko, puppet premier Sergei Stepashin and ex-premier Viktor 

But you cannot pick a successor without simultaneously taking on other 
pretenders to the throne. In light of this, political observers note a new
of Kremlin confrontation with Moscow Mayor Yuri Luzhkov. Luzhkov is
certainly a 
force to be reckoned with, and one Yeltsin is increasingly ired with,
thanks to 
the anti-Yeltsin vote of many pro-Luzhkov Duma deputies in the impeachment 

The Kremlin has given the thankless task heading the anti-Luzhkov strike
to ex-premier Sergei Kirienko. Last week the "kinder surprise" of Russian 
politics launched a virulent attack on Luzhkov, criticizing his managerial 
practices in Moscow. Kirienko promised to run for the post of Moscow mayor if 
mayoral elections (as Luzhkov would have it), are held in December 1999
of July 2000. Kirienko knows he cannot defeat the popular Luzhkov, but said
intends to use his electoral campaign to expose the pernicious "Moscow
model of 
management," which Luzhkov wants to transfer to Russia as a whole. To add 
insult to injury, Kirienko called the Moscow media a docile instrument of 
Luzhkov's bureaucratic machine.

Kirienko certainly has a point when he says that Luzhkov has lost the ability 
to hear criticism -- hence his painful reaction to any critique. Yet
own managerial record is hardly something to boast of. It was under his short 
yet eventful tenure as prime minister that Russia lost the remnants of its 
credibility with foreign creditors and that millions of Russians lost their 
savings overnight. And Luzhkov, apart from being a "doer," and a healthy
one at 
that, has at least one plus vs. the current Kremlin resident - Luzhkov would 
not seem inclined to fire his cabinent every month. The Moscow Mayor has 
maintained and preserved a cohesive team throughout his tenure, which could 
mean a larger measure of stability in a Luzhkovian Russia. So it is that the 
best Kirienko could seem to hope for is to play the role of cannon fodder 
against Luzhkov's heavy artillery.

The mayor continued to build his populist imagte during last weekend's 
high-profile Pushkin's festivities in Moscow. He also said he would sue 
Kirienko -- not for libeling the mayor, but for libeling the Moscow press.
the boyish ex-premier will hardly become a Dantes to Luzhkov's Pushkin.

Pushkin's bicentenary, which reached its peak on Sunday, is now behind us.
there is one innovation coming out of these celebrations which Russia needs
carry on into the future. A regular notice had been run for the past year, 
announcing how many days were left before Pushin's 200th anniversary. What 
Russia now needs is a daily updated on the number of days left in President 
Yeltsin's term.

If Russian TV doesn't oblige (chances are, indeed, slim), then it is the West 
which at some point could step into the fray. In fact, the position of the
quickly become a key factor deterring Yeltsin and his "family" from hanging
to power at any cost. The channels for delivering the message can be worked
later, but the essence should be crystal-clear: "We respect Yeltsin and
what he 
has done for Russia, but now he has to go as promised, without fearing for
own and his family's security. Any artificial changes to Russia's political 
system aimed at cancellation of presidential elections would be regarded as a 
violation of democracy and a backsliding to totalitarianism."


Russia: Kremlin Players Vie For Political Power
By Floriana Fossato

Following recent battles over the formation of a new Russian government,
many politicians and observers in Moscow are now speculating how the
struggle will affect the presidential race in mid-2000. Our analysis, by
Moscow correspondent Floriana Fossato, is divided into three parts. Part
One looks at the leading players in the recent struggle. Part Two looks at
the ongoing search within the Kremlin for president Boris Yeltsin's
political heir. Part Three examines early positioning in the race to
succeed him.

Moscow, 8 June 1999 (RFE/RL) -- According to Russian media, a number of
conflicting Kremlin clans played a part in last month's abrupt firing of
Yevgeny Primakov as prime minister. 

The sacking followed lengthy speculation the move was imminent. There were
regular reports of president Boris Yeltsin's growing dislike for Primakov,
who in preceding months had failed several loyalty tests and was seen to be
moving increasingly toward Yeltsin's communist foes. 

The head of energy monopoly UES, Anatoly Chubais, known as a master of
Kremlin intrigue, hinted in interviews he had a role in advising Yeltsin on
firing Primakov. Chubais and other former pro-reform officials may have
been hoping to induce Yeltsin to start some kind of liberal revenge after
Primakov's exit from the scene. And indeed, when Yeltsin fired Primakov, he
claimed he was acting because the government was making little progress on
economic reforms. 

However, Chubais and his associates, known earlier as "young reformers,"
lacked a candidate for prime minister acceptable to the Kremlin and to
other groups trying to influence Yeltsin. Chubais's group ended up backing
Yeltsin-loyalist Sergei Stepashin, a former interior minister with little
training in economics, but someone who Chubais portrays as representing
younger, more liberal-minded officials. 

Another group suspected of having a role in Primakov's dismissal and in
advancing its own agenda is "The Family," so called because the group
reportedly includes Yeltsin's daughter Tatyana Dyachenko and controversial
businessmen Boris Berezovsky and Roman Abramovich. 

Berezovsky's and Abramovich's roles remain unclear. Abramovich had
previously been known as Berezovsky's business partner, but depending on
which media commentator one listens to, Abramovich has either pushed
Berezovsky out of the picture or is acting faithfully on his behalf. 

The Family's candidate for the post of prime minister appeared to have been
an obscure government minister, Nikolai Aksenenko. Indeed, it was not clear
until the last minute whether the Kremlin had presented Stepashin or
Aksenenko to the State Duma to replace Primakov. 

After 10 days of in-fighting, Aksenenko was made Stepashin's first deputy
in charge of industrial policy. However, Stepashin's lack of real authority
within the Kremlin was exposed when he failed to win approval of his
candidate to oversee financial and macroeconomic policies. A third group
also probably played a role in Primakov's ousting. It's centered on the
media conglomerate "Media Most" (owner of Russian NTV television) and is
thought generally to oppose the interests of The Family. 

The principal shareholder in Media Most, Vladimir Gusinsky, spoke recently
with RFE/RL's Russian Service. He said in upcoming parliamentary and
presidential elections he personally backs pro-market "Yabloko" leader
Grigory Yavlinsky, but he says he also supports Moscow Mayor Yuri Luzhkov. 

"If we talk about my personal sympathies, I do not hide that I like in
particular Grigory Yavlinsky. I believe the future of the country is with
Yavlinsky ... I would even say that personally I will do everything I can
to help "Yabloko," not only Yavlinsky, so that they can win in the next
elections. This does not mean that NTV television will give anybody some
kind of priority ... This said, to a considerable extent, I sympathize with
Luzhkov's positions. I like very much the fight against fascists that he
has developed in Moscow. I like his uncompromising position against the

Since Yavlinsky and Luzhkov were unlikely choices for prime minister,
Gusinsky's group didn't have a preferred candidate for the post after
Primakov's sacking. However, it's believed the group sought to block the
influence of The Family in filling cabinet posts. 

Observers say Media Most opposes The Family because of failed expectations.
The group is believed to have played a role in helping Yeltsin to defeat a
Communist-led impeachment effort in the State Duma. A television
commentator told our correspondent that "Media Most people have a reason to
be unhappy," adding "they helped the Kremlin block impeachment ... but then
things did not continue as they had wished." 

Analysts say Media Most may have been angered because former Deputy Prime
Minister Vladimir Bulgak, who is seen as close to the holding and who
oversaw monopolies, including telecommunications, in earlier governments,
was not included in the new cabinet. 

Media Most outlets -- particularly NTV and Radio Echo of Moscow -- have
done their best to spread an intense wave of speculation concerning the
plans of The Family and the connections of Abramovich. 

The group's media allege The Family aims to obtain full control of
budgetary financial flows as well as over the cash flows of key monopolies,
including the railways ministry, Gazprom, Unified Energy Systems and the
oil pipeline company Transneft. 

The allegations have been denied and the level of speculation is
disturbingly reminiscent of past information wars fought by
media-controlling oligarchs. However, some of the concerns raised in the
squabble seem real. 

The daily "Vremya-MN," financed by structures controlled by Russia's
Central Bank, echoed the opinion of most Russian political analysts when it
wrote that "never before has the curtain behind which the political game is
conducted been as transparent as now." It says political interests are
"indecently naked." 

And NTV anchorman Yevgeny Kiselev spoke for many when he said recently that
"people seriously wonder whether Yeltsin controls his entourage or whether
the contrary is true."

(First of three features looking at recent developments in Russian politics
and at upcoming elections.) 



MOSCOW, June 8 (Itar-Tass) -- Speaker of the Russian State Duma lower 
house of parliament Gennady Seleznyov on Tuesday said here that Russian 
Prime Minister Sergei Stepashin might be soon dismissed if his name 
kept being mentioned in the context of the upcoming presidential 
election in Russia. Seleznyov was alluding to a recent interview by 
Chief of Kremlin Staff Alexander Voloshin, who had claimed Stepashin 
might well prove an aspirant for the presidency. 
Seleznyov further added that the Russian president would not like 
anybody being called his "successor." 



MOSCOW, June 8 (Itar-Tass) - President Boris Yeltsin has signed a 
decree setting up a department for political planning inside his 
administration, the press service of the presidential administration 
reported on Tuesday. 
The new department will be responsible for drafting a single technology 
for the preparation and implementation of political decisions, 
analysing the results of their implementation, and adjusting various 
branches of the presidential administration. 
Besides, it will prepare proposals for the running of the 
administration, based on the results of opinion polls and analyses of 
the social and economic situation in Russia. 
Also, the department will work out scenarios and make forecasts for 
Russia's developments in the political, economic, and social fields, 
and submit relevant proposals to Yeltsin. 
The department will organise sessions and conferences with the 
participation of experts, members of political parties movements, and 
Deputy chief of the administration Dzhakhan Pollyeva will be in charge 
of the department, and the number of its staff will not exceed 20. 


Moscow Times
June 9, 1999 
EDITORIAL: Is Kiriyenko For Real, Or Just a Tool? 

Sergei Kiriyenko, the former prime minister, has said over the past several 
days that he will run for Moscow mayor against incumbent Yury Luzhkov, if the 
elections are held in December as Luzhkov apparently wants them to be. This 
could be a hopeful sign for Russian democracy, with two prominent politicians 
contesting the mayoralty of the capital. 

That is, of course, if Kiriyenko is really serious about becoming mayor - and 
not being used as a tool of the Kremlin. 

If Kiriyenko's threat to run is simply the act of a politician adrift from 
the structures of power, looking to find a new political home as a Kremlin 
ally, then it's just more of Russia's non-ideological struggles for raw 

In any case, the liberal former oil executive - who is from Nizhny Novgorod - 
would face an uphill fight. For all his many flaws, Luzhkov bases his power 
to a considerable degree on public support, not just on economic or 
bureaucratic structures. He actually builds things that ordinary people 
understand - like the new freeway exchanges on the Outer Ring Road. He won 
election in 1996 with more than 90 percent of the vote. 

Against that, Kiriyenko would place his own record: five months as prime 
minister struggling to push through economic reform legislation that, however 
well intended or needed, was only dimly comprehended by most people. His 
brief tenure was ended by the government's failure to pay its debts - not the 
greatest legacy to advertise. 

Of course, if Kiriyenko is just a Kremlin stalking horse, the election won't 
be about issues, but about kompromat. Of course, two can play that game, and 
undoubtedly would. 

It would be too bad if a Kiriyenko challenge turned out to be only a part of 
the Kremlin administration's effort to undermine the Moscow mayor - because 
they don't consider him an acceptable successor to Yeltsin as president in 
2000. It would be just another war of political clans, in which the broader 
interests of Muscovites would not exactly be the first consideration. 

Kiriyenko currently is a politician without a home. He has kept his fledgling 
New Force movement aloof from the liberal Right Cause coalition, and unless 
he hooks up with someone risks become just another of the powerless liberal 
splinter groups like the ones that botched the 1995 election to the State 

But we wouldn't want to be spoilsports, so we'll give him the benefit of the 
doubt. It would be quite a spectacle. It's hard to see a walkover as a 
victory for democracy, either. 

At the very least, it would be an instance of the warring clans using 
elections as their battleground, giving ordinary people a chance to have 
their say in the fight. 


Financial Times
June 8, 1999
[for personal use only]
RUSSIA: Regions show first signs of revival 
Samara's governor thinks the grassroots economy is stirring, writes John 

Dressed in a blue baseball cap and a white coat, Konstantin Titov marches 
through the sweet-smelling Rossiya confectionery factory, shouting out his 
recipes for economic success to trailing journalists.

The energetic, 54-year-old governor of Samara, one of the brightest of 
Russia's increasingly assertive regional leaders, declares that the country's 
experiment with liberal market economics did not end with last August's 
financial crash. More reforms, harder work, smarter education and increased 
investment, Mr Titov argues, will eventually see Russia right.

There is no doubt that Russia's financial crisis had a shuddering impact on 
Samara, an industrial region on the Volga river, 800km south-east of Moscow. 
One indication of the fall in economic activity is the reduced traffic flows 
through Samara airport: the monthly total of international flights has fallen 
from 55 to 60 before the crisis to eight to 10.

But throughout its history Russia has shown a remarkable capacity for 
regeneration and the first, fragile shoots of revival are already visible. 
Local businesses in Samara appear to have adjusted to Russia's new economic 
climate with surprising flexibility and speed.

While most of Russia's macroeconomic numbers remain dire, the grassroots 
economy is clearly stirring. Local producers have taken advantage of the 
rouble's devaluation to oust expensive imports. Enterprising companies have 
been increasing their exports.

Long term strategic investors - such as Nestlé, the Swiss food conglomerate 
that has just opened a $7.8m Nesquik drinks line at its Rossiya confectionery 
plant - are taking advantage of substantially lower infrastructure costs. The 
local administration forecasts that by the end of 1999 the region's gross 
domestic product will have rebounded to the level of July 1998, the month 
before the crash.

The Zhigulyevskoe Beer plant is just one of the beneficiaries of the rouble 
devaluation and can now undercut Czech and German imports, which were eroding 
its market.

"The crisis was very bad for Russia, but it was very fortunate for us. I 
think we should erect a monument to Kiriyenko," says Yuri Saprunov, the 
brewery's general director, referring to the former prime minister who let 
the rouble float.

In the more sedate surroundings of the city's White House, Mr Titov says the 
Samara government - unlike some other regions - was not panicked into 
erecting internal trade barriers or sheltering its local producers in the 
wake of Russia's financial crisis but simply let the market do its work.

Mr Titov explains that the state's role in the economy should be like that of 
a referee on a football field, doling out yellow and red cards to those who 
break the rules but trying not to interfere with the free flow of play.

This non-interventionist approach has won Samara a disproportionate share of 
the foreign investment that has trickled into Russia. But it is also 
beginning to attract the attentions of Russian comp-anies wishing to avoid 
the high costs and bureaucratic complexities of Moscow. One such is the 
Siberian Aluminium Group, which has recently acquired the Samara 
Metallurgical Kombinat and is moving its headquarters to Samara.

Oleg Deripaska, the group's president, says: "The density of state officials 
in Moscow is one thousand times more than in Samara. We are happy to be in 
Samara and to have met a governor who pursues an open-door economic policy 
and to whom efficiency is the only measure of activity."

The vast Samara metals plant, which was built to supply the Soviet Union's 
mighty military industrial complex and space industry, has been reorienting 
its output to civilian ends. The plant exports the bulk of its production and 
is even confident of winning orders from the Airbus consortium.

But like the rest of Russia, Samara has much to do to attract the scale of 
investment needed to spur vibrant, long term economic growth. Foreign factory 
managers complain that they are still frustrated by bureaucracy, enduring 
visits from local, regional and federal sanitation inspectors, for example, 
who all make contradictory demands.

Domestic businesses rail against the rapacious banking system and the 
arbitrariness of Russia's taxes. But one of the biggest impediments to growth 
remains the lack of managerial experience and the poverty of ambition.

The Zhigulyevskoe brewery, for example, produces wonderfully tasty beer. But 
its 550 employees, who collectively own the plant, do not want to take out 
new credits to modernise their equipment or lose control by selling equity to 
outside investors. They seem resigned instead to a gradual slide into 

For many Russians, it seems, the market has delivered such perverse outcomes 
and painful surprises that it is still something to be feared rather than 
embraced - in spite of Mr Titov's evangelism.


Abramovich 'Can Manage Without Berezovskiy' 

Moskovskiy Komsomolets
7 June 1999
[translation for personal use only]
Article by Leonid Krutakov: "Smell of Oil Invigorates Abramovich; 
Berezovskiy Could Interfere in Plans for New Partition of State Property" 

Berezovskiy has started to get nervous. This was 
confirmed by BAB's [Berezovskiy's] Friday press conference at Interfax. 

For the first time, to maintain his good name, Boris Abramovich made 
himself look like a fool in an attempt to prove to everyone that he still 
controls the "family." BAB was even obliged to articulate an 
anticonstitutional scenario for the further development of events with 
the dissolution of the State Duma. Previously this role was assigned to 
either Zhirinovskiy or Sysuyev. 

Berezovskiy's position is indeed precarious. Yuriy Skuratov dealt a very 
blow to Boris Abramovich's good name. They say that after Skuratov's 
first meeting with Yeltsin at the Central Clinical Hospital the latter 
literally "lashed" Dyachenko with the words: "I told you not to make 
contact with him. What is it, don't you have enough money for panties?" 

The situation is further aggravated by the fact that BAB's former protege 
Roman Abramovich has ceased to have any need of him. 

Having put his own people in the government (First Vice Premier Aksenenko 
and Fuel and Energy Ministry chief Kalyuzhnyy) Abramovich can manage even 
without Berezovskiy. Formerly BAB provided political cover for 
Abramovich's plans in the oil industry. And those plans are impressive. 
Kalyuzhnyy has attested to his subordination to Roman Abramovich by returning 
Sibneft to the list of Iraqi oil exporters while the state-owned 
Transneft, Rosneft, Slavneft, and ONAKO are still in line. Let us remind 
you that under Primakov it was planned to amalgamate the latter three oil 
companies into a State Oil Joint-Stock Company directly subordinated to 
the Ministry of Fuel and Energy. Abramovich and Kalyuzhnyy have their own 
views of the oil industry's future. 

But the remaining pieces of state property are too big to swallow at one 
sitting. So the "family" businessman has decided to reach agreement with 
other players in the oil market in order not to enter into war with them 
all. As a result by mutual agreement Sibneft is to take on Rosneft, which 
it has long had its eye on since the days of Chernomyrdin's premiership. 

Lukoil will get the coveted ONAKO -- Lukoil chief Alekperov was the 
fiercest opponent of the creation of a state oil holding company, 
demanding the division of state property. According to the "treasurer's" 
scheme Slavneft will go to Alfa. 

The result of Abramovich's agreements with Alekperov could be the future 
appointment of Semen Vaynshtok, director of "Lukoil-West Siberia," as 
first deputy minister of fuel and energy. But Abramovich does not want to 
share with everyone and is planning to appoint one more old acquaintance 
-- Kochnev, head of the Ministry of Fuel and Energy central dispatch 
department -- as Kalyuzhnyy's deputy. Kochnev's present deputy, Ivan 
Matlashov, is assigned the role of Transneft leader. 

Today Abramovich decides all questions with the "family" directly without 
intermediaries. He has no need of Berezovskiy's services as a 
professional lobbyist. If Roman Abramovich manages to implement the plan 
to repartition the oil industry we shall witness a rapid waning of Boris 
Berezovskiy's star. Actually, it was to this that BAB's press conference 
at Interfax was devoted. 


Lebedev Seen as Yeltsin 'Family' Choice for Central Bank 

Moskovskiy Komsomolets
7 June 1999
[translation for personal use only]
Article by Natalya Shipitsyna: "Russian Budget Will Become Family 
Budget; President's Entourage Wants To Grab Central Bank" 

Last week Sergey Stepashin officially determined 
the spheres of influence of each of his deputies. Which, however, in no 
way means an end to the cadres battle. Frontal attacks are in the past 
but in the next few months we shall observe pitched battles. Less noisy 
but none the less serious for that. 

Already we can sum up the first results. The premier has nonetheless 
succeeded in forming a government apparatus but he has lost control over 
the basic financial flows, over the natural monopolies, the State Customs 
Committee, the Pension Fund, and so forth. The "gang of four" -- Tatyana 
Dyachenko, Aleksandr Voloshin, Roman Abramovich, and Valentin Yumashev -- 
have one peak left to scale: the Central Bank. A place worth fighting for. 

In addition to the gold and currency reserves currently estimated at 
$11.6 billion, the Central Bank's chief merit is the printing press. If 
the "gang of four" manages to put their own man in the seat of Central 
Bank chairman, the entire Russian budget will be transformed into the 
"family's" pocket where money for the elections will be concentrated. The 
Kremlin already has a suitable candidate for the post -- the notorious 
National Reserve Bank chief Aleksandr Lebedev. 

We have already described the high-profile financial scandals in which 
this banker's name figures. 

Let us remind you that the National Reserve Bank served as the 
instrument for laundering money for elections through mutual offset 
schemes with the Ministry of Finance. According to the rumors, Lebedev 
has a most direct involvement in the making public of the video cassette 
with the "man resembling Skuratov." At least Skuratov himself asserts 
that the surveillance on him was organized by the "Konus" protection 
agency, which provides security for the National Reserve Bank in general 
and Lebedev himself in particular.... 

The head of the National Reserve Bank has already tried to enter power: 
Two years ago with Mikhail Zadornov he was a contender for the post of 
finance minister. But he failed. A new attempt could be far more 
successful: He is being dragged up by Abramovich himself. Proof of 
Lebedev's close ties with the "family" is the fact that it was the 
National)2ch in the past helped Roman Abramovich to buy Sibneft and then 

Legally it is virtually impossible to remove the present Central Bank chief, 
Gerashchenko: Apart from the will of the president the State Duma's 
agreement is also required. And there can be no doubt that the deputies 
will not approve his dismissal even when faced with the threat of the 
dissolution of parliament. But here too the president's entourage has 
examined reserve moves -- for instance, Lebedev could be promoted to the 
rank of acting chairman of the Central Bank (as happened five years ago 
with Tatyana Paramonova) and then they could calmly wait for the elections. 

It is true that once again this is only one option of the mass which 
the ideological centers of both teams have worked out. Today all the 
players are extremely cautious and are trying in particular not to show 
that they belong to anyone's pack. Thus, on Saturday Mikhail Zurabov, the 
new Pension Fund chief (also known for his closeness to the "family") 
politely refused an invitation to an outing to mark the birthday of 
Aleksandr Zhukov, head of the State Duma Budget Committee (whom Stepashin 
planned to make a counterweight to Aksenenko) with the excuse that he was 
terribly busy. In actual fact according to Moskovskiy Komsomolets's 
information at the time he was... sampling the cuisine at a famous Moscow 
restaurant with several delightful female companions.... 

Already closeness to the 'family" is assessed far more highly than any 
relations of friendship. If the "gang of four" manage to gain control of 
the Central bank, turning the Russian budget into a family budget, then 
"kinship" relations will be simply worth their weight in gold. 


Russia's Young Grapple With Heroin 
By Mitchell Landsberg
June 8, 1999

MOSCOW (AP) -- She was just a kid when the whole drug thing hit. She's still 
just a kid, actually, barely 20, but Olya has the depth of vast experience 
now in her soft brown eyes. 

She is sitting on a couch in her neighbor's apartment with one black combat 
boot resting across her knee. Her blond hair is stubble length. There's a 
hole in one ear where an earring might be. She exudes cool self-awareness -- 
and crushing self-doubt. 

``It all happened immediately, at one time,'' she recalls. ``There was 
nothing and then everything came at once. Heroin chic. Tarantino. The music, 
everything. Sick, pale girls were in fashion.'' 

At the time, the early to mid '90s, Olya was coming of age in a soul-leaching 
Moscow suburb of identical, decaying high-rise apartment buildings. Being 
young and smart and disaffected, she thought it was cool -- ``simply 
interesting'' -- to do drugs. 

She smoked pot at 14, took hallucinogens at 15 and heroin at 17. 

Had she been born 10 years earlier, she might have rebelled with beer and 
cigarettes and pirated Western rock. Growing up in the new Russia, she and 
her friends became junkies instead. 

Today, she is sadder and wiser, but has no regrets. ``It was a great life,'' 
she says without irony. 

Russia is in the throes of a drug epidemic. Cheap heroin is flooding into the 
country from Afghanistan; cocaine and Ecstasy and LSD from the West; 
marijuana from Central Asia and the Russian south. 

Heroin happens to be the drug of choice at the moment. With little drug 
education, and a government that doesn't differentiate among types of drugs, 
there is no particular stigma attached to it. Western movies -- such as 
Quentin Tarantino's ``Pulp Fiction,'' a huge hit in Russia -- have, to some 
extent, made it chic. And the supply is relatively abundant and cheap. 

As a result, a country that had little experience with drugs during much of 
the Soviet era is battling to cope with something most Western countries have 
been dealing with for decades. 

Poorly paid border guards and police are easily bribed by drug dealers. 
Long-term drug treatment is mostly unheard of, except in expensive private 
clinics available only to a few rich. Short-term treatment is available, but 
largely ineffective. 

Pyotr Kamenchenko is one of Russia's few psychiatrists with extensive 
experience treating drug addiction. Hanging around Russia's nascent rock 
scene in the 1980s, he witnessed the vanguard of the Russian drug problem as 
the country's first young rock stars followed in the path of their Western 

``When I was a student, from 1976-82, there wasn't any case of drug usage in 
my college,'' Kamenchenko recalled. ``Maybe marijuana, but only a few people 
and only a few times.'' 

Later, he would get to know young rockers who were fast becoming national 
stars, and fast slipping into serious drug use. Being the only psychiatrist 
they knew and trusted -- even today, he wears lots of black leather and 
writes rock music reviews -- Kamenchenko became the unofficial drug counselor 
for the rock scene. 

Even then, drug use in Russia was a strictly fringe phenomenon. Russians were 
drinkers, not drug users. But in the past decade, that has begun to change 
among the young -- especially the educated, urban young. 

The government has a list of about 2 million officially registered drug 
users, at least double the number of a decade ago, according to Viktor 
Yaponchik, deputy director of the Interior Department's anti-drug program. 
But even the most sheltered bureaucrat knows that only hints at the problem. 
In some parts of Moscow, drug use is rampant among people in their late teens 
and early 20s. 

Tatyana, 24, with dark circles under her eyes and blond hair sheared off at 
mid-neck level, comes from one such neighborhood. 

By her account, she was the prototypical ``good girl,'' always the best in 
the class, the pride of her family. She was also a social outcast, ignored by 
the kids she envied, the cool, smart, disaffected ones. Eventually, she began 
to cross the line. 

``I wanted to experience something new -- strong sensations. I wanted to be 
like these friends who were showing me a different side of life,'' recalled 
Tatyana, who, like other drug users, asked that her last name not be 

She spoke in a dead voice while sitting on a couch in an office in Moscow's 
Narcological Hospital No. 17, the largest hospital for drug abusers in 

A gloomy complex of tall, gritty brick buildings, the hospital has 2,900 beds 
and treats 20,000 patients a year for drug and alcohol abuse. These days, 80 
percent of its patients are heroin users. 

Tatyana came to the hospital to break a heroin habit she began six years 
earlier, when she was 18. It was cheap and fun at first, and thrilling. 
Eventually, she was spending 400 rubles a day on heroin -- about one-third of 
an average monthly salary in Russia. She stole some of it from her parents; 
she wouldn't talk about how she got the rest. 

Now, after 42 days of detoxification and short-term rehabilitation, she was 
nearing release. She was nervous and scared and ashamed. 

She was also HIV-positive, something she'd just learned. 

``There isn't any worse punishment,'' Tatyana said, eyes filled with pain. 
And yet, she added, she took the news calmly. ``It was no surprise.'' 

Tatyana wants to find a job now. ``I have to fill in my days, in order not to 

How did this happen? How did a nearly drug-free society become engulfed in 
drugs in such a short time? 

``I have asked myself so many times,'' said Tatyana. ``I think every person 
asks himself.'' 

She has her own ideas. ``Before, in the Soviet era, there were very rigid 
rules people had to follow, where they were afraid to even speak about 
certain things in their own kitchens. Then, with this democracy, I believe it 
took on a monstrous quality, in which everything is allowed, with no 
restrictions. ... It's a deluge.'' 

Sergei Zolotuchin, the first deputy chief doctor of Narcological Hospital No. 
17, blames other things, as well -- the ``absence of clear-cut state 

In Soviet times, he said, there was at least something to believe in, a 
``national idea,'' however flawed. Now, ``with the destruction of all 
ideals,'' a sense of nihilism has descended on Russia. It's a natural 
environment for drugs. 

``Look,'' said Kamenchenko, the psychiatrist, ``in the Soviet Union, all your 
future life was programmed. School, army, marriage -- planned, planned, 
planned. Then pension. Dacha (country house). Death ... You couldn't move 
away from this. 

``Now, there are a lot more possibilities. There are a lot of people who are 
using these possibilities to make a lot of quick money. They can make it on 

``Tarantino films are like a blueprint for the younger generation. ... 
Everything is possible. Drugs are possible, sex is possible, to make money is 
possible, to be a criminal is possible.'' 

That was the world in which Olya and her friends came of age. She remembers, 
a bit wistfully, those scary-fun first days of heroin: the needles, the rush, 
the music, the thrill of life on the edge. 

Did it ever occur to her that it might be wrong? It takes a while for Olya to 
understand the question. When she does, she laughs scornfully. 

``No, I never heard of this. Of course, there were some people -- my 
ex-classmates, some of them -- who would say, `Oh, you shouldn't do that.' 
But I think they are very ordinary people. Not very smart.'' 


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